Absorption Rate and Months of Inventory in Real Estate
To calculate the months of inventory for any given market: Find the total number of active listings on the market last month. As a general rule, 5 to 6 months of inventory is considered to be a normal or balanced market. Over 6 months of inventory and we have a buyer's market. The smaller the available inventory, the tighter the market is. Keep in mind that these are simply guidelines and will differ from market to market. If you are in the market looking to buy, calculating the months of inventory can give you an indication of how negotiable sellers might be. Selling in a buyer's market will require you to put some serious thought into your pricing strategy and any incentives you may want to offer.